Understanding the 179D Tax Deduction
Section 179D of the Internal Revenue Code provides a valuable federal tax deduction for placing in service energy-efficient commercial building property (EECBP) for both new construction and building upgrades or energy-efficient building retrofit property (EEBRP) for existing building upgrades. Eligible improvements include upgrades to interior lighting systems, HVAC, hot water systems, and the building envelope.
Thanks to enhancements under the Inflation Reduction Act of 2022, there are now two pathways for 179D compliance.
- Traditional Pathway: Requires energy modeling based on ASHRAE standards
- Alternative (Measurement) Pathway (AMP): Relies on actual energy usage data, making it especially well-suited for existing building retrofits
Starting in 2025, qualifying projects can claim deductions of up to $5.81 per square foot. To be eligible, a building must achieve at least 25% site energy savings compared to its baseline, and retrofits must be placed in service on buildings that are at least five years old.
How B3 Benchmarking Supports 179D Compliance
For building owners aiming to leverage the Alternative (Measurement) Pathway and maximize 179D tax deductions, B3 Benchmarking offers a comprehensive and streamlined solution. As a powerful energy analysis and tracking tool, B3 provides the data insights and reporting needed to both qualify for 179D deductions and simplify the compliance process.
Here’s how B3 Benchmarking makes 179D easier:
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1. Energy Performance Assessment B3 collects, organizes, and analyzes building energy data to track site energy usage and identify inefficiencies. This enables owners to establish a clear pre-retrofit baseline and determine the level of improvement needed to meet 179D standards. |
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2. Data-Driven Decision Making B3’s analytics (robust database and physics-based modeling) help you identify which systems offer the best return on investment and where energy savings—and tax deductions—are most attainable. For portfolio owners, B3 helps prioritize buildings that are already close to the 179D threshold, enabling efficient targeting of resources and tax planning. |
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3. Pre- and Post-Retrofit Analysis To claim the 179D deduction via AMP, owners must demonstrate measurable energy savings. B3 provides detailed reports comparing pre- and post-retrofit energy performance, including total energy reduction and percentage improvements—exactly what’s needed for certification. |
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4. Streamlined Compliance and Documentation B3 simplifies the documentation process by generating exportable, third party-ready energy performance reports. These reports support the required professional verification, cutting down on engineering costs and administrative burden while ensuring accurate, audit-ready compliance. |
In summary, B3 Benchmarking is an essential tool for building owners seeking to take advantage of the 179D tax deduction. By replacing complex modeling with real performance data, B3 makes it easier to prove energy savings, demonstrate value to stakeholders, and secure substantial tax benefits.
Whether you’re managing a single facility or an entire portfolio, B3 Benchmarking helps align your sustainability goals with real financial incentives.
We can help. Request a Demo or get a Free Benchmark and see how energy efficiency can pay you back.